I joined my current firm in October 2003 and signed a contract that stipulated ticket charges would be $15. After only six months, the firm raised ticket charges to $25, and after another three months to $35. Because I complained and showed the signed contract, my ticket charges were reduced to $25. But, I have a feeling this isn't going to last. Can I do anything to avoid paying more or even go back to original number?
I've also got a second question. In January, I discovered $300 was deducted from my paycheck, but didn't know why. The manager explained that from now I have to pay for errors-and-omissions (E&O) insurance. He described the coverage, but when I asked for a copy of the policy, he said it wasn't ready yet. So, I'm now paying for something I don't need and am not sure what the specifics of the policy are.
My business is very small. All these charges are just killing me. I can't change firms. These developments have made me feel very uncomfortable, like a slave.
Do I have any options? I know that if I grow my business, then I can leave, but what about now? I feel very bad about my firm and do not want work for them.
Unfortunately, you may not have many options. It's common for a broker/dealer to write into the rep agreement a clause that allows the b/d to change unilaterally the pricing charged to the rep upon 30 or 60 days notice. You should check to see whether your rep agreement has such a provision.
If there's no clause allowing for unilateral pricing changes, then the firm is obligated to honor the original price set forth in the contract (until it exercises the voluntary termination provision, which would end your affiliation with the b/d).
Additionally, you might voice a concern that your recruitment to the b/d was, in essence, a bait and switch. You may be able to bolster your position by mentioning that other b/ds honor, for at least the first year, the original prices in the contract of a new rep.
If you're unable to obtain a positive response from your b/d after raising these issues, then the hiring of legal counsel is always an option. However, I'd be reluctant to pursue an arbitration (or even a simplified arbitration, which uses a streamlined process and is decided on the papers) since such a legal action will likely destroy your working relationship with the b/d.
With respect to your E&O insurance policy question, there is most likely a clause in the rep agreement that allows the b/d to charge a monthly fee for E&O insurance purchased by the b/d on behalf of itself and the reps.
The E&O rate is usually subject to change on an annual basis. Mandatory participation for all reps is the norm among independent b/ds. Although E&O rates have skyrocketed in the past few years, this is a form of protection that every financial advisor needs in today's environment. It's unlikely your b/d will give you a copy of the actual policy, but you should expect an E&O handbook explaining the coverage of the policy and a declaration page.
If your frustration and lack of confidence continue after making a good faith attempt to improve the situation, your only solution here might be to switch to a new b/d.
Any ticket charges should have been explained and understood when you started work or when you signed your contract. If it isn't part of your contract and wasn't explained at the time you started work, you may have a legitimate complaint.
The firm's deduction for insurance may have been implemented by management, not only for your firm's protection, but yours, as well, and may well now be a condition of employment. The need for such insurance is a lot more evident right now, given the substantially higher awareness level of investors and the increased litigious environment we are currently experiencing. I'd advise you to check to see whether the charge is imposed on everyone. It might be like the uniform a police officer has to wear, but pay for, at the same time.
On the matter of switching firms, I'd ask this: Are you confident that these same circumstances wouldn't be equally present at other employers? Sometimes the devil we know is better. Though we can acknowledge that some firms and some managers do a better job communicating with their employees than others, you should ask the question of whether this is the business you want to be in and whether you'll be able to grow to a point where you can go where you want?
The fact that you feel bad about your firm and don't want to work for it may well be the most important truth at work here. It's very hard to be successful and productive if you aren't happy in your job and lack confidence in the firm and its management.
Raymond O. Wicklander, Jr.
Great Lakes Advisors Inc.
Ethical Rep is a monthly feature in which more than 30 prominent securities attorneys, experts and law school professors help Rep. readers deal with work-related ethical quandaries. Have you encountered a situation at work that makes you uncomfortable? Are you confused about how your responsibilities to clients might change as regulations continue to evolve? Drop a line to Rep.'s contributing editor, Ann Therese Palmer, and our group of experts will help you work through the problem.
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